The malling of Minnesota

Minnesota State Roundup

Published July 1, 1991  | July 1991 issue

Since the state's first shopping center opened in the Highland Park area of St. Paul in 1939, Minnesotans have made shopping at the mall a part of their everyday life.

Succeeding decades saw the shopping center and mall concept grow at a tremendous rate; first with strip centers, then with regional malls, and today the larger part of the growth lies in the development of small regional malls and neighborhood mini-malls. Currently, 286 shopping centers in the Twin Cities metropolitan area vie for the local retail dollar according to a recent Metropolitan Council report. (The Metropolitan Council represents seven counties in the Minneapolis - St. Paul area.)

In the past two years alone, 1989 and 1990, 35 new shopping centers have been constructed in the area, and the results of the Metropolitan Council's report indicate that the area has been willing to support the growth. A comparison of retail sales of the nation's most populated areas (Metropolitan Statistical Areas) indicates that while the Minneapolis-St. Paul area ranks 16th on the list in population, it climbs to 13th in terms of retail sales. More telling is the fact that the area ranks seventh based on per capita spending, indicative, according to Tim Fleetham of the Metropolitan Council, of the high level of disposable income in the Twin Cities area.

With the addition of new shopping centers, increased retail footage and intensified competition in the area, existing malls and centers have found ways to hold their own and stay competitive. The second annual Minnesota Shopping Center Association (MSCA) Report (based on data gathered in July 1990 from about 250 area shopping centers) states that vacancy rates and rent costs were virtually unchanged from the year before, suggesting a degree of stability in the overall market.

But what is not apparent in the vacancy and cost statistics are the concessions, such as free or reduced rents and building renovations, that shopping center landlords have had to grant tenants in order to remain competitive. Jill Noack, a leasing representative and the chairperson of the MSCA Report, says that "aggressive competition for good tenants has created a climate wherein landlords are being forced to be much more 'creative' in their lease deals than ever before." In addition, Noack stresses that data from the 1990 survey does not reflect the more troubled economic conditions of the past 12 months or the impact that the Gulf War may have had on the economy.

Aside from the continued development of neighborhood centers and bargain-oriented discount malls, the greatest challenge facing existing shopping centers, suburban Bloomington's "Mall of America," is scheduled to open in August 1992. As the largest shopping center in the nation, the mall will certainly affect the sales of other metro area shopping centers. Both Noack and Fleetham agree that while sales will probably dip for area centers, most will manage to recover after the initial shock. Noack feels that over the long term, the variety of retail outlets will increase, markets will stabilize and healthy, balanced competition will resume. Indeed, Fleetham says that despite the high number of metro shopping centers, the Twin Cities lags behinds the national average in retail footage per capita, and he expects even more construction.

To create that stability and to remain as viable retail forces in the metro area, existing shopping centers are finding that they need to refine their marketing techniques. Shelley Klaessy, marketing director for Knollwood Plaza, a large regional shopping center in the Minneapolis suburb of St. Louis Park, says that centers will be more conscious of the specific type of customer to which they cater. Spending patterns, market analysis and other research will increase in importance for these centers. Ultimately, says Klaessy, "Neighborhood malls will fill the needs for local customers, and the attention to customer service, fair treatment and personalization will allow most centers to remain competitive."

Dean Davis